Tomorrow during the Asian session, we get from Australia, RBA’s interest rate decision. The bank is expected to remain on hold at +0.75% and currently AUD OIS imply a probability of 91.42% for the bank to do so. It should be noted that the market seems to price in currently, a 56% probability for a rate cut in the bank’s next meeting in February. Hence should the bank keep rates unchanged as expected and maintain a dovish tone in the accompanying statement, we could see the Aussie weakening. A dovish tone in the accompanying statement could be perceived as a sign that the bank paves the way for rate cut in the next meeting. Please note that RBA’s Governor Lowe recently, had opened the door indirectly to lower rates, yet downplayed the possibility of a QE program for the bank. Should the bank on the other hand maintain a more neutral tone maybe encouraged by China’s recent positive data, we could see the Aussie strengthening. AUD/USD regained during today’s Asian session, any losses it had made on Friday and once again tested the 0.6775 (R1) resistance line. Since the pair seems to breaking the downward trendline incepted since the 19th of November, we switch our bearish outlook for a sideways scenario, yet RBA’s interest rate decision could turn the pair’s direction. Should the bears regain control over the pair’s direction, we could see the pair aiming if not breaking the 0.6750 (S1) support line and hover lower. Should the bulls take over, we could see the pair breaking the 0.6775 (R1) resistance line and aim for the 0.6800 (R2) resistance level.
…while JPY weakens on improved Chinese data…
Market confidence got a slight boost during the weekend and today’s opening, as China’s manufacturing data for November were quite upbeat. Both the official NBS manufacturing PMI for November as well as the Caixin manufacturing PMI, showed an increase in the activity of China’s crucial manufacturing sector. According to analysts, the Caixin survey also showed China’s total new orders and factory production at strong levels, lifting sentiment further. The lifted market confidence weakened safe haven JPY and should the market’s positiveness continue we could see the Yen rolling further down. USD/JPY rose during the Asian session today testing the 109.70 (R1) resistance line, by hitting a six-month high. The pair seems to have broken the upward trendline incepted since the 22nd of November, hence we tend to switch our bullish outlook for the pair in favour of a sideways movement. Should the pair come under the selling interest of the market, we could see it aiming, if not breaking the 109.70 (S1) support line. Should on the other hand, pair’s long positions be favoured by the market, we could see it breaking the 109.70 (R1) resistance line and aim for the 110.50 (R2) resistance level.
Other economic highlights today and early tomorrow
Today, during the European session we get Germany’s and UK’s final manufacturing PMI for November. In the American session we get Canada’s Markit manufacturing PMI and from the US the ISM manufacturing PMI, both for November. Also please bear in mind that ECB President Christine Lagarde speaks today.
As for the week ahead
On Tuesday, we get RBA’s interest rate decision from Australia and UK’s construction PMI for November. On Wednesday, we get from the Australia the GDP growth rate for Q3, Eurozone’s final Composite PMI for November and from the US the ISM non-manufacturing PMI, while from Canada BoC releases its interest rate decision. On Thursday, from Australia we get the retail sales growth rate for October, from Germany the factory orders growth rate for October, Eurozone’s revised GDO growth rate for Q3, Canada’s trade data for October, the US factory orders while OPEC will be starting its meeting in Vienna. On Friday, we get from Germany the industrial production for October, the US employment report for November, Canada’s employment data for November and also for the US the U. Michigan consumer sentiment for December.
USD/JPY 4 Hour
Support: 109.00 (S1), 108.35 (S2), 107.75 (S3)
Resistance: 109.70 (R1), 110.50 (R2), 111.30 (R3)
AUD/USD 4 Hour
Support: 0.6750 (S1), 0.6722 (S2), 0.6695 (S3)
Resistance: 0.6775 (R1), 0.6800 (R2), 0.6822 (R3)
